Financial Preparedness for Hurricanes: Which States Can Weather the Storm?

As the intensity and frequency of hurricanes in the North Atlantic has increased in recent decades, the need for homeowners to be financially prepared for the risks posed by these violent storms has never been more important. Delaware, Mississippi and Alabama rank as the states least-prepared for a hurricane, with major states such as New York and Texas not far behind.

Financial Risks of Hurricanes: The Least- and Most-Prepared States

There are a variety of ways individuals and state governments can mitigate the financial risks posed by a severe storm. To create a hurricane-preparedness ranking, we looked at 18 Atlantic and Gulf states and scored their readiness for hurricanes by using an evaluation of state building code standards—which enhance safety and mitigate damage costs—and calculating the breadth of homeowners and flood insurance coverage among the states' residents. At rank 18, Delaware scores as our least-prepared state, while Florida is ranked first—meaning it is the most-prepared.

Least-Prepared States for Hurricanes

Delaware: 18th of 18

Preparedness score: 42.6/100

According to our analysis, Delaware is the least-prepared state for hurricanes. The main reason is its building code regime: There is no statewide residential building code, nor are there a statewide requirements governing the licensing process for building officials, according to the Insurance Institute for Business and Home Safety (IBHS). Delaware also has a low rate of flood insurance given its number of risky housing units, with under half as many National Flood Insurance Program (NFIP) policies as there are at-risk homes. The average coverage of NFIP policies among the 18 states is closer to 60%.

However, the state's lack of preparedness may also reflect a perceived lack of risk: Since 1996, Delaware has only experienced 205 flooding events, the second-fewest behind Rhode Island, according to the Federal Emergency Management Agency (FEMA). The state's geography plays a role, as Delaware is positioned in a concave part of the Atlantic Coast and is unlikely to be directly struck by a hurricane.

Mississippi: 17th of 18

Preparedness score: 45.4/100

Given low rates of homeowners insurance coverage and poor building code enforcement, Mississippi ranks as the second-least-prepared state on our list. What stands out is Mississippi's low number of homeowners insurance policies, which make its residents financially vulnerable to property damage due to perils generally covered by homeowners insurance like wind, rain or hail. According to our research, the state only has enough homeowners insurance policies to cover 64% of owner-occupied housing units, by far the worst ratio among our sampled states.

Alabama: 16th of 18

Preparedness score: 59.5/100

Alabama received the second worst building code adoption and enforcement score, driven by a lack of a mandatory statewide building code system or program to govern the licensing of building officials. Only its flood insurance coverage prevents the state from ranking even lower, with the second highest ratio of in-force policies to at-risk homes.

Major States Underprepared for Hurricanes

Rounding out the bottom third in hurricane preparedness are two of the largest states in the country by population: New York and Texas.

New York: 15th of 18

Preparedness score: 60.7/100

Low levels of flood insurance coverage drag New York down despite decent scores in building code regulation and homeowners insurance coverage. Although the number of flood insurance policies jumped after Hurricane Sandy in 2012—from below 170,000 to as high as 195,000 in the years following the storm—the state has fallen back to approximately 180,000 policies, not nearly enough to cover 460,000 at-risk homes. This trend reflects a general pattern insurance in general: People tend to buy more insurance after a disaster but tend to let their coverage lapse if another disaster does not happen for several years.

Texas: 13th of 18

Preparedness score: 63.6/100

Although Texas has outsized flood insurance coverage, with more flood insurance policies in force than at-risk homes, the lack of a statewide program to license building officials hurts its score, with Texas rating as the fourth worst for building code regime. The lack of a statewide building code means that vulnerable regions may not be required to build homes up to modern storm-resistant standards. After Hurricane Harvey in 2017, local officials in Rockport—a coastal county in Texas that implemented more stringent building codes—said that newer homes built to higher building code standards suffered less damage than older homes from the storm.

Most-Prepared States for Hurricanes

Florida: 1st of 18

Preparedness score: 82.5/100

Florida may be the quintessential state for hurricane landfalls, but its torrid past has also made it the most-prepared for future storms. Despite a lower share of homeowners insurance coverage than other states, Florida is considered a leader in building-code safety, with the highest-ranked building code regime of any Atlantic Coast or Gulf state and mandated programs that require aspiring building officials to take appropriate training before licensing exams. Florida also has a high ratio of flood-insurance-policies-to-at-risk-homes. With a total of over 1.7 million flood insurance policies in force, Florida has the highest absolute number of policies by far among the 18 states. Texas is a distant second with over 700,000.

South Carolina: 2nd of 18

Preparedness score: 80.5/100

The Palmetto State boasts a strong building code regime, ranking third overall. South Carolina has adopted the latest model building code developed by the International Code Council and requires registration, certification and licensing for all building officials. The state also has decent flood insurance coverage: Data from CoreLogic indicates that that the state has approximately 350,000 at-risk homes, but the NFIP reports more than 200,000 flood insurance policies in force, putting its coverage around the average of the 18 states.

Connecticut: 3rd of 18

Preparedness score: 80.1/100

Driven by a top five ranking for its adoption and enforcement of building codes, Connecticut rounds out the top three most-prepared states. Connecticut reached this spot despite ranking in the middle of the group, ninth, for both its home and flood insurance coverage. Reflecting its commitment to building safety, the Connecticut Division of Construction Services is developing initiatives to improve the storm resilience of coastal properties to high wind, flooding and storm surge risk.

Importance of Building Safety, Homeowners Insurance and Flood Insurance When Preparing for Hurricanes

Statewide building code standards, plus broad homeowners and flood insurance coverage are all key factors in a state's financial preparedness for a hurricane. The least-prepared states in each category were as follows:

Building Safety Ranking

Homes built to stricter safety standards are the first line of defense against damage caused by a major storm. A recent report issued by the National Institute of Building Sciences found that every $1 spent upgrading homes beyond the 2015 International Residential Code—an established building code standard—could save the country $4 in disaster costs. This makes statewide standards for the adoption and enforcement of building codes important for hurricane preparedness, as they mandate a certain level of hazard mitigation features.

Delaware, Alabama and Mississippi are the three worst performers on statewide building code standards in our 18 state sample. Building safety is based upon assessments by the Institute for Business & Home Safety (IBHS). Using our 50% weighting of the IBHS scores, scores range from 0 to 50, with 50 representing the most-prepared states.

IBHS Ranking

Ranking

State

2018 IBHS score (out of 50)

18

Delaware

8.5

17

Alabama

13.5

16

Mississippi

14

15

Texas

17

14

New Hampshire

23

13

Maine

27

12

New York

32

11

Georgia

34

10

Maryland

39

9

Massachusetts

40.5

7 (tie)

North Carolina

41.5

7 (tie)

Louisiana

41.5

6

Rhode Island

43.5

5

Connecticut

44.5

4

New Jersey

45

3

South Carolina

46

2

Virginia

47

1

Florida

47.5

Flood Insurance Coverage Ranking

Floods tend to be the leading cause of property damage in a hurricane, and given that homeowners insurance does not usually cover flood damage, it's particularly important for homeowners in hurricane-prone states to have separate coverage. The more homeowners in a state with flood insurance policies compared to at-risk homes, the less likely they'll be exposed to the financial risk of flood damage. Residents in mid-Atlantic and Northeast states like Virginia, New York and Massachusetts are more vulnerable to flood damage given the low level of policies purchased as a share of vulnerable housing units. States received a maximum possible score of 30, with 30 representing the most prepared states.

Flood Insurance Ranking

Ranking

State

Flood insurance score (out of 30)

18

Virginia

7.8

17

New York

11.6

16

Massachusetts

11.9

15

Maine

13.7

14

Delaware

14.2

13

New Jersey

14.3

12

Rhode Island

15.3

11

North Carolina

15.5

10

Maryland

15.9

9

Connecticut

16.9

8

Georgia

17.3

7

South Carolina

17.6

6

Louisiana

18.4

5

Mississippi

18.7

4

Florida

19.1

3

New Hampshire

24.9

2

Alabama

28.3

1

Texas

30

Despite the increased incidence of hurricane risks in recent years, the number of in-force flood insurance policies in vulnerable states such as Virginia and New York have declined notably since Hurricane Sandy in 2012, falling a total of 8% each over the six years. This could reflect a higher risk tolerance of these states residents as a major regional disaster recedes into the past. Despite their lower risks, inhabitants in these states shouldn't rule out the protection provided by flood insurance: Nearly 20% of all claims to the NFIP come from moderate-to-low risk flood areas.

Residents of southern states like Texas, Alabama and Florida tend to be more prepared for the risk of flooding, with a higher ratio of flood insurance policies to at-risk homes. Texas, in particular, has seen a surge of purchases of flood insurance since Hurricane Harvey swept the state in 2017, with in-force policies increasing 18% from 2016 to 2018, up to a current total of approximately 720,000.

However, an increase in the number of statewide policies is no guarantee that at-risk homes are adequately prepared. Texas had over 600,000 flood insurance policies in force when Harvey hit, but many of the most at-risk locations were unprepared. For example, it has been estimated that almost 100,000 flooded homes in Harris County, Texas, one of the areas most adversely affected by the storm, did not have flood insurance before the disaster.

Homeowners Insurance Coverage Ranking

Homeowners without a home insurance policy are exposed to the risks of hail, wind and rain damage in a hurricane. To measure states' preparedness on this front, the third component of our score is the ratio of in-force homeowners insurance policies in the state compared to owner-occupied houses.

Despite their constant exposure to hurricanes, states like Mississippi, Louisiana and Florida have significantly lower rates of homeowners insurance coverage than other states in the sample, with coverage ranging from 64% to 79% of homes. Although homeowners insurance is required if one borrows to finance a home purchase, lower coverage may reflect higher insurance rates in these states, as all three rank among the top five most expensive for homeowners insurance premiums in the country.

Northeastern states with broad levels of homeowners insurance coverage tend to receive high scores this category. Many of the top states had policy coverage equal or close to the total number of owner-occupied housing units, giving the states coverage rates at or close to 100%. These states' numbers are a reflection of the fact that approximately 95% of homeowners own a homeowners insurance policy nationwide. States received a maximum possible score of 20, with 20 representing the most prepared states.

Home Insurance Ranking

Ranking

State

Home insurance score (out of 20)

18

Mississippi

12.8

17

Louisiana

13.8

16

Florida

15.8

15

North Carolina

16.2

14

Texas

16.7

13

South Carolina

16.8

12

New York

16.9

11

Alabama

17.8

10

New Jersey

18.5

9

Connecticut

18.9

8

Virginia

19.4

7

Rhode Island

19.8

6

Georgia

19.8

1 (tie)

Massachusetts

20

1 (tie)

Maine

20

1 (tie)

Delaware

20

1 (tie)

Maryland

20

1 (tie)

New Hampshire

20

Methodology

Our hurricane preparedness ranking was created combining three factors. The factors are explained below, with their weighting in the final score noted in parentheses.

Building code safety score (50%): We used ratings for state building code policies and enforcement systems created by by the Insurance Institute for Business & Home Safety (IBHS) and drew from their research and analysis of recent building code policy developments.

Flood insurance coverage score (30%): For flood insurance coverage, we compared a state's total in-force flood insurance policies—taken from the National Flood Insurance Program—versus the number of housing units considered vulnerable to flooding risk, calculated by CoreLogic. Data for private flood insurance policies—estimated at less than 5% of the market—was not included.

Homeowners insurance coverage score (20%): To assess homeowners insurance coverage, we compared total homeowners insurance policies by state—taken from a report by the National Association of Insurance Commissioners—to the number of owner-occupied houses in each state—taken from the U.S. Census Bureau.

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